Correlation Between Walmart and AMGEN

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Can any of the company-specific risk be diversified away by investing in both Walmart and AMGEN at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walmart and AMGEN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and AMGEN INC, you can compare the effects of market volatilities on Walmart and AMGEN and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walmart with a short position of AMGEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and AMGEN.

Diversification Opportunities for Walmart and AMGEN

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Walmart and AMGEN is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and AMGEN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMGEN INC and Walmart is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walmart are associated (or correlated) with AMGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMGEN INC has no effect on the direction of Walmart i.e., Walmart and AMGEN go up and down completely randomly.

Pair Corralation between Walmart and AMGEN

Considering the 90-day investment horizon Walmart is expected to generate 0.57 times more return on investment than AMGEN. However, Walmart is 1.76 times less risky than AMGEN. It trades about 0.52 of its potential returns per unit of risk. AMGEN INC is currently generating about -0.08 per unit of risk. If you would invest  8,245  in Walmart on September 4, 2024 and sell it today you would earn a total of  1,019  from holding Walmart or generate 12.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Walmart  vs.  AMGEN INC

 Performance 
       Timeline  
Walmart 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.
AMGEN INC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AMGEN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMGEN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Walmart and AMGEN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Walmart and AMGEN

The main advantage of trading using opposite Walmart and AMGEN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, AMGEN can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AMGEN will offset losses from the drop in AMGEN's long position.
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The idea behind Walmart and AMGEN INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center.
Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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